LNG: What is the future of gas in Mendoza?

Gas production in Mendoza, which has been declining since 2016, presents an opportunity for development with Liquefied Natural Gas (LNG). Although it is an incipient activity at the provincial level, it is an advanced technology that allows for the reactivation of small wells. Several developed countries use it for energy generation and cargo transportation.

In the last report "Oil and Gas Market" published by Fundación Ideal, it is revealed that between January and February 2021, Argentina produced 9.65 million cubic meters (m³) of gas. This represented a 14% decrease compared to the same period in 2020, which continued the negative trend that began in April of last year.

Mendoza is a very small province in terms of gas production and does not escape this national contraction. In fact, its production has been falling continuously since the beginning of 2016. "In the first two months (of 2021) production contracted by 27% compared to the same period in 2020, and the volume represented only 33% of the production of the same period in 2015," specifies the report.

Alejandro Bianchi, an economist at Fundación Ideal, considered that gas production has been falling for many years due to lack of investment and long-term stimulus policies. "Gas production has been declining at the national level, but in Mendoza the trend is more pronounced", he adds.

In this negative context, there is a technology that allowed, in the middle of last year, to reactivate a field in the south of Malargüe and that could help reverse the decline. This is Liquefied Natural Gas (LNG), which takes advantage of small reserves that were not profitable until now.

The big problem with gas is its transportation, as it is necessary to build a pipeline to transport it from the exploitation site to the final consumption networks. In contrast, with LNG, gas can be liquefied and transported in special trucks, generating "virtual pipelines" and reducing costs.

 

From Calmuco to Anchoris

The field mentioned is Calmuco, 160 kilometers from Malargüe city. Abandoned in 1996, it was reactivated last year with LNG facilities and now generates 40,000 m³ per day. The gas is liquefied at 160 degrees below zero and then taken by trucks to the Anchoris Thermal Power Plant (Luján de Cuyo), which in turn produces electricity capable of supplying 125,000 users.

This was explained by the Mendocina Energy Company (Emesa), a private company with majority state participation. Its president, Pablo Magistocchi, stressed that gas is Argentina's main fuel and that it accounts for 60% of what power plants burn to generate electricity.

"When you had a reservoir with quality gas, if you were not near a pipeline you had no way to dispatch it. In the 90s, when they found gas in Mendoza, many times they declared it as gas reserves and they were closed, like Calmuco", commented Magistocchi. In addition, in many oil fields, gas was vented and lost without being able to take advantage of it.

The Mendoza project will be generated jointly between Emesa and the Galileo Group. Osvaldo del Campo, CEO of Galileo Technologies and president of the Galileo Group, commented that they have felt very supported by the institutions of Mendoza and that this allowed, in 2017, to start this project through the Anchoris plant.

 

 

"Today we work with the entire production system in the wells of Malargüe. We take gas from wells that were drilled and never put into value. Through LNG technology, we can take advantage of these wells and obtain gas that is consumed in Anchoris", explained del Campo.

 

Galileo's CEO acknowledged that the reserves "are a bit limited in Mendoza," but stressed that they can capture small wells that had been dispersed and put them into value. "We have quite active plans. They are wells that are now connected through the virtual pipeline with industries in the country. It has just begun, but it looks promising ahead", del Campo emphasized.

The mayor of Malargüe, Juan Manuel Ojeda, also gave his perspective, for whom the reactivation represents a new and incipient development of gas: "The Calmuco area was closed for a long time because they were looking for oil and found gas, and the market did not support development". In addition, he highlighted provincial plans such as Mendoza Active Hydrocarbons to recover abandoned wells.

Ojeda recalled that Malargüe produces more than 90% of Mendoza's gas and that, although it does not provide large royalties like oil, it does generate a lot of work at the local level. "If it weren't for the Calmuco field, that area would be paralyzed. It is an incipient production, but it is a good start", he said.

In addition, the mayor of Malargüe valued the fact that gas is transported to generate electricity in another municipality in Mendoza: "The gas produced and the added value of transforming it into electricity, is an important multiplier for the province. It is not sold in a zeppelin outside and we do not take advantage of it".

 

Projects

One possibility under study is to supply Uspallata based on LNG, a locality that has an electrical network but no gas network. In a study conducted by Emesa with the IDB, it was found in an energy census that the greatest need for energy is for heating rooms in winter, and currently gas from a cylinder (which is not LNG), electricity and firewood are used.

Pablo Magistocchi pointed out that the demand for electricity has grown more than the supply in Uspallata and they are studying the feasibility of supplying it with LNG. The negative aspect - he warned - is that this has a logistical complication and the Enargas regulation is lacking on how to supply household networks with LNG.

Regarding the Uspallata project, Galileo's CEO recalled that this gas can serve a population for heating or for generating electricity. "In both cases we are looking to do a project in Uspallata that has a significant energy deficit," said Osvaldo del Campo.

The businessman commented that for many years they have been looking for ways to link this locality disconnected from the gas pipelines and believes that with LNG it could be achieved. "Tomorrow we can take the gas. The complicated thing is to build the distribution network so that it reaches the people", said Galileo's CEO.

Regarding other projects, del Campo believes that there is still a long way to go: "We are looking for fields. As a country we need gas and we want to put into operation what is available. There is gas from Calmuco, other wells in Mendoza and more in Neuquén".

For his part, Juan Manuel Ojeda considered that this technology will help reactivate other wells that were not profitable before and pointed out that in the industrial area of Malargüe they are setting up an LNG loading station for special vehicles. The mayor also highlighted its better performance compared to other fuels, such as diesel.

"It would be interesting for LNG to be available to users. It is more environmentally friendly and costs 40% less than diesel. This energy could be used in various engines, from vehicles to water wells on farms", said Ojeda.

For that, the mayor of Malargüe insisted, a marketing structure and an investment plan would have to be set up so that each interested party can have its own reservoir, as is currently the case in Chile. "I imagine a scenario where each agricultural estate, instead of having fuel tanks, has its own generators based on LNG", Ojeda pointed out.

 

Source: "Los Andes" Newspaper.

 

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